Reality Check | Ephraim Schwartz » Outsourcing to the Middle East

March 11, 2008 | Comments: (0)

Outsourcing to the Middle East

TAGS: Outsourcing

The business park phenomenon proliferates, as cheap IT labor communities keep cropping up in emerging markets

As globalization continues to blanket the world and companies continue to look for geographies where they can get IT work done for less, the latest find appears to be the Middle East.

In a small suburb of Cairo, a company called Smart Villages launched Smart Village Cairo, where you will find the likes of Dell, IBM, Microsoft, Alcatel, and Eriksson, each with its own building, about 100 companies in all.

[ For more on recent trends in outsourcing and offshoring, see "The ins and outs of outsourcing and offshoring" ]

I spoke with Virender Aggarwal, director and senior vice president of Satyam Computer Services' RoW (Rest of World) territories, which include Asia Pacific, Middle East, India, and Africa. Satyam, an Indian company, just opened up its Global Solution Center in Smart Village Cairo for software implementation and maintenance, as well as other IT services.

"Egypt has a large population with a lower income and good-quality manpower," Aggarwal told me.

What more could you ask for?

Someday soon, there will be a book that chronicles the mad search by corporations for the very last place on earth where they can find cheap labor -- a comedy or drama, I'm not sure.

Meanwhile, I suppose Smart Villages are nothing more than glorified business parks, but to be honest, the whole idea of a Smart Village is somewhat creepy. It is sort of like putting all the worker bees in one spot, but in this case, you won't find the queen hiding in the center. Instead, she sits in a far-off place exceedingly more luxurious than Smart Village Cairo or Smart Village Damietta or Smart Village Alexandria.

I touched on this offshore phenomenon back in May 2007. The concept of a putting all your worker bees in one spot where they not only work but live is all the rage in China.

The Chinese government built a million-apartment complex as part of a business park. The government pays the mortgage for workers, giving them a 70- or 99-year lease, and it pays for their commute to and from work.

And so last week, Satyam opened its solution center in Smart Village Cairo serving mainly the European market, especially those with operations in the Middle East.

Egypt, which has a population of 80 million, graduates a lot of software engineers who speak French as well as English.

As Aggarwal puts it, oil is more than $100 a barrel, meaning a lot of money is flowing into the Middle East. Satyam has offices in eight oil-producing countries in the region, including Saudi Arabia, Dubai, and Oman.

Global companies, Fortune 1000 especially, with operations in the Middle East are looking to mitigate risk. Rather than getting all the work done in India with a single outsourcing provider, many companies prefer to have the work located in multiple countries even if it is all contracted with the same vendor. Keep in mind the geopolitical risks and the needs of business continuity as well as keeping work close to its customers' Middle East centers.

I'm of two minds about the creation of a place like Smart Village Cairo.

Yes, to an American, it is creepy to have fabricated villages designed just to serve the needs of giant international companies -- not that we haven't been doing something similar with migrant workers for years.

On the other hand, it creates jobs where there were none, and that could mean a better life for millions of people -- with the caveat that the workers are treated well and paid fairly. This, in turn, can bring life to local economies. Perhaps if the workers don't like the food at the corporate lunchroom, a small falafel stand inside an RV will motor up to the employee entrance every day at noon -- that kind of thing.

It is hard to say where this all leads. If we look back far enough, we see that all businesses started locally, and as technology advanced –- trains, planes, and refrigerated container trucks-- it allowed companies to expand their markets.

Some say no one country can be self-sufficient. We all need to import and export goods in order to survive. But I suppose as technology advances, more and more of our manufacturing, farming, and production will be automated, so services will become the backbone of what the workers of the world will supply. In that case, what we are witnessing with the outsourcing phenomenon is the next evolutionary stage in commerce: the importing and exporting of services.

That's fine, I guess, as long as we don't forget that services are not a commodity product that can be packed up on a pallet with an RFID tag stuck to its side and loaded on a truck. Services require people, and they must be treated with respect. I still hold out hope.

One last odd thought: As the world's natural resources become depleted, someday the earth may not be self-sufficient, and we may have to find new worlds to trade with.

Related articles
• The ins and outs of outsourcing and offshoring
• Outsourcing moves to the core
• The truth about China

Posted by Ephraim Schwartz on March 11, 2008 03:00 AM

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